TECHNOLOGY: Too Close to Call; Mannesmann Vote on Vodafone Bid Should Be a Squeaker

By EDMUND L. ANDREWS

Published: January 31, 2000

Klaus Esser, the chairman of the German industrial power Mannesmann, has built his career by amassing control. The next seven days will determine if he loses it.

In the last week of an election-style campaign that may determine who will dominate Europe's booming market for wireless communications, Mr. Esser is desperately trying to persuade shareholders to vote down a hostile takeover bid by Vodafone AirTouch of Britain. Mannesmann shareholders have until next Monday to decide whether to accept or reject Vodafone's offer of about 290 euros, or nearly $282.50, for each share of their stock.

It is the biggest hostile takeover ever attempted, and it has electrified Germany, a country where hostile bids have been rare and successful ones almost nonexistent.

Mr. Esser suffered a potential major defeat today when Vodafone announced a major alliance on Internet projects with Vivendi, one of France's most important media and communications companies. [Page C2.]

The deal is contingent on the success of Vodafone's bid, but it is devastating to Mannesmann because Vivendi's chief, Jean-Marie Messier, has been a longtime ally. Indeed, Mr. Esser had sought to devise his own merger with Vivendi.

With a current value of about $155 billion, the hostile bid is inflated by investors' delirious expectations about wireless stocks. And it has sent Mr. Esser barnstorming for support, from Dusseldorf to New York, with the same core message: ''It is easy to see how this would benefit Vodafone shareholders. But it offers nothing to Mannesmann shareholders.''

Though Mannesmann's share price of 260 euros still trails Vodafone's offer of more than 300 euros, it has soared 78 percent since rumors of a Vodafone offer began in early November. Mr. Esser, who has raised his estimate of the ''true'' value of Mannesmann twice since the fight began, says the offer is still too low.

But Vodafone's chief executive, Chris Gent, has waged his own charm offensive. Knowing that resistance to his offer is strongest in Germany, he spent much of last week visiting investors there and exchanging potshots with Mr. Esser.

Both companies have taken out numerous advertisements in German newspapers, sometimes in response to each other. After one Mannesmann ad featured a baby and the headline ''He has made big plans,'' Vodafone countered with one showing a breast-feeding baby and the headline ''Whoever wants to get big needs a good mother.''

Mr. Esser's chances of victory are only even at best, according to analysts, who say that about 60 percent of Mannesmann shares are held by foreign investors, and many of them appear ready to sell.

All this has left Europeans, especially Germans, gaping in disbelief. The value of European mergers hit a record pace in 1999, exceeding that of United States mergers for the first time.

Indeed, German companies were among the biggest foreign buyers, as when Deutsche Bank bought Bankers Trust and Mannesmann itself bought the British cellular carrier Orange for about $33 billion.

Yet many Germans, including Chancellor Gerhard Schroder, attack the Vodafone bid as an ''Anglo-Saxon'' assault on their country's tradition of a ''consensus'' economy.

The shock has been all the greater because of the target: Mannesmann, which a decade ago was a maker of steel tubes and auto parts, transformed itself into a fast-growing communications company that had seemed to be doing almost everything right.

Yet what may surprise most, given the uproar, is the extent to which Mannesmann and German leaders have been willing to play by Anglo-Saxon free-market rules. The clash has shaped up largely as a struggle between two expansionist corporations with a common goal: creation of a pan-European communications giant that controls networks across the Continent.

That attitude may explain why the Germans have not tried to challenge Vodafone's right to mount a hostile bid. There is no push to restrict foreign takeovers. And, in a departure, neither the government nor Germany's patrician financial institutions have tried to protect Mannesmann by buying a friendly stake in it.

''This generates very emotional reactions among the people who are affected, but it isn't a rational reaction,'' said Hans Georg Crone-Erdmann, director of the Association of Chambers of Commerce in Mannesmann's home state, North-Rhine Westphalia. ''When you see which banks, insurers and chemical companies are merging across national boundaries, then you know that these kinds of takeovers are natural.''

It would be hard to imagine two more different personalities leading the campaigns. Mr. Gent, a gregarious and irreverent 51-year-old, is a magician at using the Vodafone stock as currency for acquisitions.

Mr. Esser, a methodical and phlegmatic 52-year-old lawyer who studied business at the Massachusetts Institute of Technology, achieved his successes by taking a handful of shrewd, calculated chances.

But both have strong ambitions to expand their companies -- ambitions that were set on a collision course early last year.